Help fund your kid's retirement?! May sound crazy but hear me out.

• ...what I found in being an advisor is that most people want to kind of replicate whatever their parents did for them. Whether that be you know, some loans or paying 100% of the school costs...(04:13)
• The other option though, that can be incorporated, is retirement instead or in conjunction to this traditional college focus. (04:27)
• ...would you rather have in this example, the $65,000 pay off all of these college loans or that $65,000 give them one and a half million dollars when they're about to retire, of tax free money? (07:34)

Quote for the episode. "...if I can teach them about money through some student loans, and also free them up to be able to enjoy more time with family and make more memories with their kids...that's a win/win." (10:45)

Securities offered through TFS Securities, Inc., and Advisory Services through TFS Advisory Services, an SEC Registered Investment Advisor Member FINRA/SIPC. TFS Securities, Inc., is located at 437 Newman Springs Road, Lincroft, NJ 07738 (732) 758-9300.

Welcome to the EnjoyMore30s Family Finance

podcast, the only podcast dedicated to making life more

enjoyable for young families by hitting on the financial topics

that tend to weigh on us, stress us out, and distract our focus

from simply enjoying life.

Hello and welcome once again to the EnjoyMore30s

Family Finance podcast. So every week, I am here talking to you

about money so you can take some steps forward, gain that

confidence and just remove that financial anxiety. That's what

we're trying to do to allow you to focus solely on making your

life more enjoyable. This series as you know, by now, all about

the kids, the Your Kids Money Mindset series, and we're going

to continue doing that for you here today. As parents, we want

obviously to help out our kids. That's that's a no brainer. We

all know that's true. But it seems we're programmed as

parents to feel this obligation many times to help pay for

college. Everybody's doing it. If we're not giving that to our

kids to then it's almost like we're bad parents sometimes. But

what if we looked at something else? What if we helped them pay

for an even bigger future expense instead?

Now as always, if you like what you're hearing, please make sure

to subscribe or follow us on whatever podcast app you listen

to, wherever you go. Clicking that star, leaving the review,

it really, really helps us out. We want to reach millions, all

the millions of other young families out there just like

you.

Now last week, if you remember, we discussed all savings for

your kids through life insurance policies, the so called kind of

Gerber policies, and dug into why in my opinion, if you're

trying to save if the goal, the primary driver is 'I want to

save for my kids', then you almost certainly don't want to

be going about doing that through that life insurance

policy. So if you haven't checked out that episode yet,

definitely do that soon.

Now, for today's episode, it's titled Give Them Education...or

Retirement, which is a really odd title, probably you haven't

heard it put that way before. But we're going to cover

something like I said, it might initially sound crazy, but it's

really an intriguing way of looking at it. It's an

intriguing idea that may be more attractive than you could

realize. The goal for today's episode is to help you

understand that you do have choices for how you choose to

help your children. We know you want to help, I'm going to just

go ahead and assume you want to help your children. So let's

make sure you know all the options that are at your

disposal.

When I went to college, I knew absolutely nothing when it came

to money. Zero. And had very little appreciation for money. I

was 18 years old. I mean, what did you really expect? If you

think back to when you were 18 years old, I would guess you're

probably in a similar boat. You know, I knew working in high

school that you know, it was hard and I valued the money that

I earned. But you know, everybody goes to college,

right? I hear everybody takes out loans, right? So, you know,

part of me was like, who really cares, this is normal, taking

out a bunch of loans is normal, and the value and the amounts

that added up, they don't really resonate with you at that point

in your life. I was offered a full ride to Montclair

University. So they were like "here, take $100,000 for free",

which I obviously being the intelligent 18 year old that I

was passed up to go to TCNJ and pay money and take out loans.

Now I did meet my wife, Lauren at TCNJ so I have to say,

obviously it was 100% worth it. But from a financial standpoint,

that was like, you know, crazy, stupid. So 18 year olds going to

college are for the most part, not financially intelligent, at

least what I've come across, in my opinion. The loans that I had

after college, they were in some ways a blessing to me. They

taught me that, 'hey, this is what 10s of 1000s of dollars of

debt looks like', right? This is what it is. This is what having

to pay back loans looks like. This is basically you know what

being responsible, this is being an adult, this is what this

looks like. And what I found in being an advisor is that most

people want to kind of replicate whatever their parents did for

them. Whether that be you know, some loans or paying 100% of the

school costs for the kids so they don't have that hanging

over their head.

The other option though, that can be incorporated, which is

this crazy idea, right? Is retirement instead or in

conjunction to this traditional college focus. So with paying

for college, you're trying to get them ready for that race to

come, right? Yeah, we want to get all this off of them. Do the

training, the conditioning, the endurance, so that when they get

out of school, they have less over their heads, less weight on

their shoulders, and boom, they're just ready to go.

Thinking about retirement instead though is kind of like

just saying, instead of trying to only focus on the

conditioning, the endurance, the training, all that kind of

stuff, why don't I just try to make the race a little bit

shorter, and then they don't need as much maybe. So it's a

different way of approaching it. So here's kind of how it works.

And like anything, it doesn't have to be all or nothing, you

don't have to only save for college or only save for

retirement. But these are just all your options so that you

know what you have to choose from, at least when you mix them

together, and whatever proportion makes sense for you.

So let's say that you save $150 a month for your kids to go to

college. So 18 years worth when they're 18 years old, if we

assume a 7% return, you end up with around $65,000. And if you

use this for college in the more traditional way, then this is

all gone. Right? And for simplicity sake, just for the

sake of this explanation, let's say they went to maybe a

community college or in state or whatever combination, but you

know, $65,000 was the perfect amount, it covered the whole

entire bill. So certainly not a bad setup for them then, right?

Here's where it gets fun, though. So let's say instead,

let's say that they took out loans for the full amount, which

for those who had some school loans and valued that lesson,

that might be a goal anyway, like for me and my kids. I kind

of want them to have some degree of loans, because I did and I

feel like that really did teach me a good lesson of how what

debt looks like. And this is what your choices look like

later on down the road. So what if instead now so we still have

this $65,000. And we instead give it to them in something

like a Roth IRA into contributions over the next 10

to 12 years, whatever it might be. So every year we put money

out of this pool that we created for them we're putting into this

Roth IRA. Over 11 years with the $6,000 a year limit, we put all

$65,000 into the Roth for them. Alright, so now when they're 65,

and they're ready to retire, what did you give them instead

now, assuming that same 7%. So I can either give them $65,000 for

college, or I give them $65,000 for retirement. That $65,000 at

age 65 now, when your kid is ready to retire, is worth

roughly one and a half million dollars at that 7%. And oh wait,

if we use a Roth IRA, it's completely tax free. You saving

$150 a month for 18 years was one and a half million of tax

free money for them at age 65 for retirement. I mean, how huge

is that? So when we compare, would you rather have in this

example, the $65,000 pay off all of these college loans? Or that

$65,000 give them one and a half million dollars when they're

about to retire of tax free money? You know, what would be

your what would be your choice? And I'm not saying there's a

wrong choice or a right choice. But you could see that there's

definitely at least a choice, there's something to think

about, there's something to pause and say, 'Hmm, maybe I

want to evaluate this option over here a little bit, at

least'. Now a completely fair comment is that this is a really

long payoff, right? This is a long term gift. I'm starting now

and they're not getting that for a long, long time. And it may

feel difficult to give for such a long time pay off into the

future. And again, that's completely fair. I get that. At

the same time, you're actually giving them something in the

present, if you share that this strategy is in existence, is an

application for them today. 'You need to pay off your school

loans over the next 10 years' most likely true, you know,

'that's the deal, Johnny'. But when you have your own family,

and trips to Disney, and all that other stuff living in the

present that you want to do, I'm giving you the freedom to go do

that. Because you already know that a huge chunk of your long

term retirement goals are now off your shoulders. You don't

have to have that weight on you. I'm giving you freedom of the

present moment.

I'm not actually giving you money at this point in time I'm

putting it away for your long term future but what I'm giving

you in the present is the freedom to go and live with your

family. So you are giving them something if you phrase it like

that. Just like when I was going to college and didn't value the

free ride, your kids likely when they get out of school and you

tell them to save early, they probably won't get that either.

They're probably say, 'Well, you know, I really want that new

car' or 'Well, no, I really want to move out of mom and dad's

house and into an apartment where I can have some fun'.

Saving early probably won't hit them. Just like taking out loans

didn't hit me when I was 18 years old. When you start

working as a full time job, it feels like a huge paycheck. It

might be something that's relatively low, you wouldn't say

oh wow, that's a huge amount of money. But when you go from

making nothing at all to like $40,000 a year, whatever it

might be, it feels huge. And your first thought isn't, you

know, okay, now I get to save for my long term future. That's

why we get and you probably have heard many people say, maybe

even yourself saying, 'If I only started when I was young',

you're taking that off of them now. Remember, they can take out

loans for college, that is definitely 100% a thing, but no

one will give you a loan to get through your retirement. That's

true for you and it's true for them, too.

So remember the goal for today. Do you have to do this at all?

No, of course not. You don't have to do any of this. If I'm

being honest, I'm still planning on helping my kids to some

degree for college. But I also plan on helping fund some of

their long term needs like retirement, because I can get a

lot lot more time for it to grow, and therefore a lot lot

more bang for my buck. Personally, if I can teach them

about money through some student loans, and also free them up to

be able to enjoy more time with family and make more memories

with their kids because those long term burdens aren't on

their shoulders. I don't want them to feel pressure, oh, I

have to work excessive hours, to give my kids a good life and

then deprive them of what kids tend to want more than anything

anyway, which is just you and your presence. Then to me,

that's a win/win. But as always, it is what you want to

accomplish. So again, that's the goal for today not to do this

strategy, but to know all your options and the angles and the

positives and the negatives, so you're more confident in

whatever one you choose.

Overall, thanks so much for tuning in today. I always love

connecting with you. Join us here again next week for the

episode that we're calling You Want a Trust? Do You Know Why?

Where we're going to cover some basics of these things called

trusts. You've likely heard of them about you know, here and

there on TV otherwise, they may seem very advanced and

beneficial and for the very wealthy, but may likely be

something that you don't actually need. You might not

actually have to worry about these things called trust. So

we'll give you more background, more education on that so you

know whether or not it's even something you should be looking

into more.

Overall, if you are able to implement what we covered today.

Fantastic. You have less to worry about than before, you can

focus more on enjoying life. That's what I want to help you

do. If you're wanting help with any of these things, though, if

you have questions you need help in clarifying, check out the Ask

Joe section on the show's website www.EnjoyMore30s.com.

That's EnjoyMore30s.com. Until next week thanks for joining me

today and I look forward to connecting with you again soon.

The conversations on this show are

Joe's opinions and provided for general information purposes

only. They do not constitute accounting, legal, tax, or other

professional advice for your specific situation. You should

always seek appropriate advice from a financial advisor,

accountant, lawyer, or other professional before acting upon

any content or information found here first. Joe is affiliated

with New Horizons Wealth Management LLC, a branch office

of TFS Securities, Inc., and TFS Advisory Services an SEC

Registered Investment Advisor Member FINRA/SIPC.